Xbox planning hundreds more layoffs and studio consolidation in 2026

Xbox is planning to lay off hundreds of employees this week as part of a second major staff reduction in 2026, according to a report from The Information citing sources briefed on Microsoft's plans. The cuts will also include consolidation of several game studios.

The latest round follows 1,600 Xbox layoffs announced in July and comes as Xbox CEO Asha Sharma seeks to reset the business and improve profit margins. Sharma has pushed the company to focus development on major franchises including The Elder Scrolls and Fallout while reducing its smaller acquired studios.

Microsoft had previously told staff it planned to eliminate another 1,600 roles by the end of its business year, though the company has not officially confirmed the remaining cuts. The July layoffs included hundreds of positions at ZeniMax Online and around 100 at id Software. That round also saw Xbox sell four studio subsidiaries: Compulsion Games and Double Fine Productions have returned to independent ownership, while Ninja Theory and Undead Labs have entered terms to join new ownership.

These cuts are part of broader restructuring across Microsoft. The company cut 9,000 jobs last year with Xbox heavily affected, followed by 1,900 cuts across Activision Blizzard, Bethesda and Xbox in 2024.